We exploit inequality restrictions on higher-order moments of the distribution of structural shocks to sharpen their identification. We show that these constraints can be treated as necessary conditions and used to shrink the set of admissible rotations. We illustrate the usefulness of this...

European financial regulation consistently gives governments privileged access to private investors, reflecting the anchor role assigned to sovereign securities as safe and liquid assets for the financial system. Legislative reforms after the financial crisis of 2008 further expanded the...

This paper investigates the financial market effects of the ECB's communication on the Pandemic Emergency Purchase Programme (PEPP). Using data for 10 euro area countries, we first analyse the impact of different communication channels such as press releases, ECB blog contributions, speeches and...

Affine term structure models of bond yields are important tools for analyzing fixed income markets and monetary policy. Estimators of Adrian, Crump, and Mönch (2013) and Diez de Los Rios (2015) replace time-consuming nonlinear search procedures with a set of simple linear regressions. However,...

How does convenience yield interact with sovereign risk and the supply of government bonds? We propose a model of sovereign debt and default in which convenience yield arises because investors are able to pledge government bonds as collateral on financial markets. Convenience yield is dependent...

We construct a sovereign default network by employing high-dimensional vector autoregressions obtained by analyzing connectedness in sovereign credit default swap markets. We develop four measures of centrality, namely, degree, betweenness, closeness, and eigenvector centralities, to detect...

This study analyzes the magnitude of the US monetary policy spillover on the Indonesian local currency government bond yield, particularly when the Federal Reserve (Fed) implemented the quantitative easing (QE), tapering off, Fed fund rate (FFR) normalization, and quantitative tightening over...

This paper evaluates the macroeconomic effects of foreign and domestic central bank government bond purchases on the Swedish economy before and during the Corona pandemic using a small open economy DSGE model with segmented asset markets. In this model, the effects of foreign and domestic...

This paper investigates the goals, costs, and benefits of official-sector purchases of government securities for the purpose of restoring market functionality. We explore the design of market-function purchase programs, including their communication, triggers, operational protocols, exit, and...

We study how regulation limiting ESG policies distorts financial market outcomes. In 2021 Texas enacted laws that prohibit municipalities from contracting with banks with certain ESG policies, leading to the exit of five of the largest municipal bond underwriters from the state. Issuers...

This paper examines mean and volatility spillovers between four green municipal bonds issued by the US states of California, Colorado, Columbia and Ohio, and the role played by the recent Covid-19 pandemic and the COP policy announcements respectively. Specifically, four-variate VAR-GARCH-BEKK...

We examine the role of institutional investors in monetary policy transmission to asset markets by exploiting a discontinuous threshold in the tax treatment of municipal bonds. As bonds approach the threshold, mutual funds, the primary institutional traders in the market, dispose of the bonds at...

In this paper, we examine the impact of eurozone membership on sovereign creditworthiness over the period 1996-2017 and the underlying channels through which the impact operates. We find that: (a) eurozone membership improved sovereign credit ratings, on average by over one notch; (b) the...

We empirically analyze the impact of uninsured deposits on a bank's cost of public debt. Uninsured depositors can exert market discipline over a bank and potentially reduce its agency cost of debt through informed monitoring. We use a sample of public bond issues by U.S. bank holding companies...

We examine the novel phenomenon of sustainability-linked bonds (SLBs). These bonds’ coupon is contingent on the issuer achieving a predetermined sustainability performance target. We estimate the yield differential between SLBs and non-sustainable counter-factuals by matching bonds from the...

The majority of bond trading around the world takes place in over-the-counter (OTC) markets where liquidity is provided by a relatively small number of financial institutions (dealers), who use their balance sheets to intermediate trades. This is in stark contrast to stock markets, where trading...

We analyze the effects of the PEPP (Pandemic Emergency Purchase Programme), the temporary quantitative easing implemented by the ECB immediately after the burst of the Covid-19 pandemic. We show that the differences in aim, size and flexibility with respect to the traditional Corporate Sector...